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US Treasury: Russia’s economy under “considerable strain” due to its war in Ukraine

Russia’s GDP would be more than 5% bigger if it had not invaded Ukraine as the country’s defense spending surpassed one-third of its 2023 budget, US Treasury department finds.
byYuri Zoria
14/12/2023
1 minute read
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The Red Square in Moscow. Credit: The Center for European Policy Analysis
US Treasury: Russia’s economy under “considerable strain” due to its war in Ukraine

Russia’s ongoing war in Ukraine damages the Russian economy, inflates domestic prices, and compels Moscow to allocate one-third of its budget to defense, according to the US Treasury Department, Financial Times reports.

The interplay of war, sanctions from US allies, and Moscow’s policy responses is “putting Russia’s economy under considerable economic strain,” Rachel Lyngaas, the department’s chief sanctions economist, says in a draft text seen by the Financial Times.

Lyngaas wrote that Russia’s invasion of Ukraine and the occupation of its parts were “contributing to rapidly growing expenditures, a depreciating rouble, increasing inflation, and a tight labor market reflecting a loss of workers” in its economy.

Russia’s economy would be more than 5 per cent bigger if Putin had not launched the war in Ukraine, Lyngaas argued, adding that the country was underperforming other energy exporters, including the US.

Lyngaas argued that had Putin not initiated the all-out war, Russia’s economy would have exceeded 5% in growth. 

The Treasury department revealed that Moscow’s defense spending surpassed $100 billion, accounting for nearly one-third of its 2023 budget. This substantial allocation coincides with the Kremlin’s decision to halt certain scheduled public salary increases, despite inflation soaring to 7.5%, well above the central bank’s 4% target.

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